Tuesday, December 30, 2008

Delays in Oak Creek Power Plant Allegedly Costs Nearly $500 Million

Read between the lines. 

Weather-related construction delays and other problems have added nearly $500 million to the cost of building two new coal-fired power plants in Oak Creek, the project’s builder, Bechtel Corp., said in claims it has submitted to Wisconsin Energy Corp. (WEC).

The claims were disclosed in a filing with securities regulators by Wisconsin Energy, which says the claims are “without merit.”

Bechtel has already told the Milwaukee utility holding company that it would miss the September 2009 deadline for building the first of the two coal plants. That $2.3 billion plant is now projected to be operational by the end of 2009.

Bechtel said severe weather and labor issues have led to $413 million in higher costs, while other delays in the start of construction in 2005 account for $72 million in higher costs.

Rick White, a Wisconsin Energy spokesman, said the claims submitted by Bechtel don’t qualify as exceptions warranting cost relief under the contract the two companies signed before construction began.

Wisconsin has bad weather for a good chunk of the year.  If Bechtel didn’t factor that into their bid, then they are incompetent.  But I’m willing to bet that the weather only had a minor impact on the cost overruns and that “labor issues” are responsible for the bulk.  When we get a chance to read the actual itemized claims, we’ll see if I’m right. 

(15) Comments
Posted by Owen at 1231 hrs
Politics + Politics - Wisconsin

  1. It would be interesting to know what the “labor issues” were.

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 1246 hrs


  2. It would be interesting to know what the “labor issues” were.

    Maybe.

    From what I have heard the labor issues have to do with not having enough qualified/licensed tradesman to fill the slots required.

    Although,

    Rick White, a Wisconsin Energy spokesman, said the claims submitted by Bechtel don’t qualify as exceptions warranting cost relief under the contract the two companies signed before construction began.

    Although it has committed to building the plant by the end of 2009, Bechtel has also requested schedule relief, according to the filing. Because of severe weather during the construction period, Wisconsin Energy has agreed to conduct a study to determine whether severe weather conditions played a role in the project being delayed.

    Schedule relief would mean Bechtel wouldn’t face liquidated damages of $250,000 a day for every day that the project is delayed. The damage amounts were set out in the contract the two companies negotiated several years ago.

    Sounds like anyway you want to slice it

    If Bechtel didn’t factor that into their bid, then they are incompetent.

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 1255 hrs


  3. Bechtel has been building power plants for a long time.  They should have seen this coming.  Either way, I don’t believe the cost is Weenergies problm.  A least in part.

    Posted by Steve on December 30, 2008 at 1317 hrs


  4. If there was/is a lack of skilled labor, and it is plausable, that would seem like a big news story to me.

    It would indicate a weakness or failure in all levels of education. It would reflect poorly on the technical schools most of all.

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 1401 hrs


  5. If there was/is a lack of skilled labor, and it is plausable, that would seem like a big news story to me.

    It has been in the news.

    It would indicate a weakness or failure in all levels of education. It would reflect poorly on the technical schools most of all.

    Given the esteem that labor and the trades are given around here I cannot imagine why more people are not clamoring to train for these positions.

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 1421 hrs


  6. pjr,

    I don’t recall anyone ever bashing the trades or labor around here.  Unions, yes.  Or in your mind can you not be a legitimate tradesman without belonging to a union?

    Posted by Owen on December 30, 2008 at 1427 hrs


  7. I don’t recall anyone ever bashing the trades or labor around here.

    Nice scalpel.

    Who exactly are those individuals who are members of these evil unions?

    Of course you are right, I often use goon(s) as term of endearment and respect.

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 1447 hrs


  8. There is an issue with skilled labor, it is not a problem with lack of people in the trades, it is the magnitude of the job. The local market cannot satisfy the demand for the labor needed so a large percentage of the workforce is recruited from out of state. If you want to increase the number of skilled tradesmen in the local area fine, but none will finish an apprenticeship before the power plant is done and one the construction is done there are not enough jobs for all the skilled workers you now have.

    This is a huge construction project requiring a large number of workers with very specific skills.  Bechtel screwed up the time line

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 1546 hrs


  9. To Owen’ point, nobody has dissed the trades or labor on this blog, not ever.

    Unions disrespected? Yes. The bashing goes to their self serving honchos.

    pjr: I think you are just looking for a fight today. Did your dog run away so you can’t kick it?

    It has been in the news.

    What has been in the news? Care to elaborate?

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 1712 hrs


  10. What has been in the news? Care to elaborate?

    A shortage of individuals showing an interest in learning the trades.

    Unions disrespected? Yes. The bashing goes to their self serving honchos.

    After Festa AFP in Madison much bashing and gooning of rank & file members took place, isn’t that right Owen?

    Sorry I haven’t been more submissive today Galt.

    Maybe you would feel more comfortable in an echo chamber?

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 1734 hrs


  11. After Festa AFP in Madison much bashing and gooning of rank & file members took place, isn’t that right Owen?

    Yes, of the ones who were being complete assholes.  It was not a bash of their professions, but of their personalities and behavior.

    Posted by Owen on December 30, 2008 at 1743 hrs


  12. I am (almost certainly) a friend of the WE guy who negotiated this contract, but I won’t call him to bug him about it.

    Three thoughts:  1)  the labor shortage most likely has to do with the fact that the Marquette Interchange was also under construction until recently.  And yes, then there are very specialized trades which also are short-handed.  2)  We did have the #2 snowiest winter on record AND major flooding problems recently; 3)  You recall that the JohnsonWax family and others fought this plant through every available means, which DID delay the startup by quite some time.  So in a way, J-Wax is responsible for the first $72 million.

    This is likely a suit for relief of completion-time, and will go away when/if WE grants extra time to fill the contract.  Bechtel does not need a crap name in the business.

    Posted by dad29 on December 30, 2008 at 1749 hrs


  13. Yes, of the ones who were being complete assholes.

    How could you tell the difference between AFP and labor union members?

    It was not a bash of their professions, but of their personalities and behavior.

    I believe it was a bit more specific and petty than that.

    We are going to have pretty different perspectives/perceptions on this.

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 1750 hrs


  14. I wonder what berm reconstruction costs were with the west side of the mountain sliding into the pond on at lest two occasions. Reminded me of Mount St. Helens with the amount of earth that moved.

    Posted by (JavaScript must be enabled to view this email address) on December 30, 2008 at 2127 hrs


  15. My questions as to the labor shortage…

    Is Betchel able to hire non-unionized labor or is there some provision that forces them to hire unionized labor.  And what trades are they short on?

    Posted by (JavaScript must be enabled to view this email address) on January 01, 2009 at 0934 hrs


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